What is Fair Trade?

Fair Trade is an alternative to unfair systems of world trade -- a way of seeking justice for producers through right trading relationships.

One of the principles of Fair Trade is that producers are paid a fair price -- which covers sustainable production and the costs of living -- for their goods. But while that's the best known aspect of Fair Trade for consumers, it's only a small part of the whole.

A working definition agreed in 2001 by four of the largest Fair Trade networks reads:

"Fair Trade is a trading partnership, based on dialogue, transparency and respect, that seeks greater equity in international trade.

It contributes to sustainable development by offering better trading conditions to, and securing the rights of, marginalised producers and workers - especially in the South.

Fair Trade organisations (backed by consumers) are engaged actively in supporting producers, awareness raising and in campaigning for changes in the rules and practice of conventional international trade."1

What does this mean in practice? In their book, "Fair Trade," Dr. Alex Nicholls and Charlotte Opal list generally accepted factors in a Fair Trade relationship as including:

  • Agreed minimum prices, usually set ahead of market minimums
    For example, at the time of the coffee crisis, the Fairtrade minimum price for arabica coffee was $1.21 a lb. That meant the price Fairtrade farmers received couldn't go lower. The market price at the time was sometimes below $0.5 a lb. That's a significant difference! But if the market price goes up, Fairtrade farmers receive at least the market price + the social premium.
  • Focus on development and technical assistance via the payment to suppliers of an agreed social premium . . .
  • Direct purchasing from producers
  • Transparent and long-term trading partnerships
  • Co-operative, not competitive, dealings
  • Provision of credit when requested
  • Provision of market information to producers
  • Farmers and workers are organised democratically
  • Sustainable production is practised
  • No labour abuses occurred during the production process .2

In a genuine Fair Trade relationship all of these factors work together for good.

  • The provision of credit in advance means that producers don't start their work already in debt and facing crippling repayments.
  • Over a period of time -- the result of the long-term partnerships -- freedom from debt, the provision of a fair price and the additional premium for development remove the primary impetus for child labour (extreme poverty within families), give producers the capital to undertake sustainable development practices and improve their products, help them to diversify their incomes, and give the means to improve the living conditions for the local area
  • In addition, the improved nature of the products, the direct relationships Fair Trade encourages, the capacity-building it gives to producer organisations and the market information it offers enable producers to function better in the conventional global markets. This is very important, as few producer groups actually sell all of their goods on the Fair Trade market. With their increased awareness of how markets work, however, they can generally negotiate better contracts in the conventional markets as well -- further increasing their incomes.

So that's Fair Trade in general terms. To find out more about two specific groups of standards for Fair Trade relationships, go to the page called "How to identify fairly traded goods"

Oh, and by the way -- you may have wondered why this page refers to "Fair Trade" rather than "Fairtrade." That's because the general concept is covered by the two word term. The use of the term ‘Fairtrade' (one word) is reserved by the Fairtrade Foundation as a description of "products and transactions involving products that meet international Fairtrade standards, and of related activities such as the Fairtrade Towns campaign". . . . more about that in the page noted above.

1 Definition agreed by FLO, IFAT, NEWS and EFTA.
2 Alex Nicholls and Charlotte Opal, "Fair Trade: Market-Driven Ethical Consumption" (Sage Books, 2005) 

All photographs courtesy of the Fairtrade Foundation, www.fairtrade.org.uk.

The Theology of Fair Trade

“What we do when we shop is engage in trade. . . It is impossible to buy anything without impacting the lives of other people. Since Jesus asks us as Christians to love our neighbour as ourselves, and our neighbour is any other human being with whom we come into contact, the demand to love must prevail when we shop.” Dewi Hughes, The Bible and Trade

How is Fair Trade a way of living out our Christian faith? A number of authors have worked on the theology – looking at how prophetic teachings on trade and on equity might apply in today’s context; applying, as Dewi Hughes does, the command to love our neighbour to our everyday choices; and investigating the way in which Fair Trade fits into the question of how we steward God’s creation and live in relationship with our fellow humans.

The United Reformed Church’s Commitment for Life programme has published “Fairtrade as Mission,” a small and easily accessible leaflet on the Christian ethics of Fairtrade by the Canon Chris Sugden. You can further explore these issues in Canon Sugden’s Grove pamphlet “Fairtrade as Christian Mission” available from Grove Booklets on Ethics, Ridley Hall, Cambridge, 01223-46474 or in his chapter of the same name in “Markets, Fair Trade and the Kingdom of God,” (ISBN 1-870345-19-3). Some other useful discussions of the theology of Fair Trade are

  • Dewi Hughes’ “The Bible and Trade.” This 9-page document, written for Tearfund, is available on loan from CCOW; it has also been shortened to bite-sized Bible studies for youth. To read the youth version, click here.
  • The “Lift the Label” campaign's book, “Lift the Label: The Hidden Cost of Our Lifestyle,” (ISBN 1-85078-572-4) authored by David Westlake and Esther Stansfield.
  • The meditation on fair trade by theologian Clare Amos in CCOW’s “Faith in the Balance” (available for download in the More Information and Resources section of Issues around Trade).

Does Fair Trade work?

Yes! From a small beginning, Fair Trade has grown to bring multiple benefits to producers around the world. As of February 2007, UK FAIRTRADE-Marked product sales were running at over £300 million a year. And looking at the world picture, one estimate is that global Fairtrade product sales will hit £1 billion by 2007. 1

The financial return to producers on these sales is far higher than it would be under conventional terms. According to a recent paper by Dr. Alex Nicholls, “in 2002, FLO [the Fairtrade Labelling Organisation] estimated the income benefit to Fairtrade coffee, tea, cocoa, sugar, rice, fruit, honey, and juice producers at £21m, of which £17m was attributable to sales of Fairtrade certified coffee.” This estimate is based on a comparison of Fairtrade “floor” prices (the Fairtrade minimum) with prevailing market prices. Nicholls adds “Cafédirect alone returned £2.8m in additional income to its coffee suppliers in 2003.”

In craft sales, too, producers receive higher prices. Julia Castro, president of CIAP, a Fair Trade organization of Peruvian artisans dedicated to production and export of handicrafts made by their members, estimated that Fair Trade prices were up to 1/3 higher than the norm. When asked what that meant in real terms, she responded that it gave producers like her hope for the future, as it allowed them to educate their children. 3

But the price difference is only part of the benefit of Fair Trade. Under Fairtrade standards, cooperatives and worker organisations also receive a social premium – money (up to 10% of the price of the goods sold) which they can invest in the community. The social premium has allowed producers around the world to improve their communities. The Igara Growers Tea Factory in Uganda, for example, were able to buy a tank supplying clean water, improve communication via mobile phones and a computer, purchase school materials for members’ children, and create a maternity clinic for their area, so that women no longer need to be carried up to 60km to give birth. 4 Villagers in Kasinthula, Malawi were able to create wells, so that women and children no longer lose their lives getting water from the crocodile-infested Shire river. 5 The banana farmers of the Valle de Chira cooperative in Peru created roads that enable them to bring produce to market the banana,6 and the farmers of the Juliana-Jaramillo cooperative in the Dominican Republic were able to repair the local water system, bring in sanitation systems and create a community canteen.7

Producers also receive further benefits from Fair Trade. Long-term contracts, access to market information, and access to credit allow them the psychological and financial benefit of being able to make long-term plans. They improve the producers’ ability to negotiate both Fairtrade and non-Fairtrade contracts. Oxfam’s Constantino Casasbuenas recently said that when he was working on the Oxfam coffee campaign, “most of our strongest allies, ready to talk by themselves and to get their voice [heard] (on coffee and many other social problems) were precisely the coops producing and selling coffee via the Fairtrade channels. . . . the international Fairtrade movement can be a real inspiration to so many talks and negotiations on international trade.” 8

Fair Trade can also help farmers to break out of the commodity trap. Many farmers would like to diversify out of single cash crops, but lack the funding and business expertise to do so. But to take one example, UCIRI, a coffee cooperative in the Oaxaca region of Mexico, has used some of the gains from its trade in Fair Trade coffee to diversify. Their website explains: “We are all aware that only coffee, even high quality organic coffee, is not going to be the solution for us. . . . For this reason, we are looking for alternative products.” With these aims, UCIRI has moved into the production of value-added goods for the local market, setting up small factories to manufacture organic jams and clothing.9

Footnotes and Finding Out More:

1 and 2 UK FAIRTRADE-Marked product sales taken from Fairtrade Fortnight 2007 press release. Other figures and quotes taken from Dr. Alex Nicholls’ paper “Thriving in a Hostile Environment: Fairtrade's Role as a Positive Mechanism for Disadvantaged Producers,” which can be read in its entirety on the Fairtrade Foundation website. Dr. Nicholls and Charlotte Opal’s Fair Trade contains the most comprehensive analysis available to date of the nature and impact of Fair Trade. The book is available from SAGE Publications at £21.99 or on loan from CCOW. Two other fine books are Miles Litvinoff and John Madeley's "50 Reasons to Buy Fair Trade" £7.99 in stores or on loan from CCOW and David Ransom’s "No-Nonsense Guide to Fair Trade" (ISBN 1859843344) £6.99 in stores or on loan from CCOW.

3 Julia Castro was interviewed by CCOW; CIAP’s website is www.ciap.org – there is an English-language version.

4 The story of the Igara Growers Tea Factory is told in the Fairtrade Foundation’s 2004 Church Action Guide, copies of which you can get from CCOW.

5 Kasinthula’s story was in the Summer 2004 edition of “Fair Comment,” the Fairtrade Foundation’s free quarterly newsletter. Download current and back issues of “Fair Comment” at the Fairtrade Foundation website page www.fairtrade.org.uk/resources_newsletter.htm. You can also subscribe at this site – or by calling the Fairtrade Foundation.

6 The story of the Valle de Chira cooperative is taken from Tearfund’s case study “Fairtrade bananas” available as part of Tearfund’s “Global Action” resources on Fairtrade. With thanks to Tearfund for permission to use this.

7 Juliana-Jaramillo’s story can be found at www.fairtrade.org.uk/about_benefits.htm.

8 Conversation with Constantino Casasbuenas

9 UCIRI’s website is www.uciri.org – there is an English-language version.

Fair Trade and Wider Trade Issues

Fair Trade offers an alternative trading system that benefits millions of people -- but we also need to press for reform of the global trading system as a whole.

Right now, global trade rules and practices are often rigged against developing country farmers and manufacturers. In agriculture, for instance, the wealthiest countries offer around $300 billion a year in direct and indirect support to their farmers, while developing countries are often prevented by IMF and World Bank conditionality from offering any subsidies at all. At the same time, conditionality often forces developing countries to lower their tariffs. Developed-country farmers are therefore lowering world prices across the board and “dumping” produce at prices below the cost of production in developing countries, undercutting small-scale farmers. Cotton from the US is among the most notorious examples of the effects of subsidies on world prices. Meanwhile in certain parts of West Africa, for instance, the poultry industry has been largely wiped out by cheap EU chickens.

Developing country producers also faces barriers to adding value to their products. Most of the value in a chocolate bar, for example, is added in the manufacturing process. But current tariff structures in the EU and Japan, for example, allow cocoa beans to come in at a very low rate – but charge tariffs of over 20% on finished chocolate products. So developing-country producers are stuck at the bottom of the value chain.

The Fairtrade Foundation and Traidcraft are both part of the Trade Justice Movement, which is campaigning on these and other trade issues. Within this context, Traidcraft’s policy department is working to use the Fair Trade model to challenge unfair rules and practices. The unit draws on Traidcraft’s experience as a socially responsible Fair Trade company to address issues in corporate social responsibility, trade policy and various areas of development. All of the policy unit’s publications, including “Fair Trade Tool Kit” fact sheets such as “Fair Trade in the Wider World,” are available on their website.

Other agencies that work as part of the Trade Justice Movement – and produce resources on trade justice -- include Action Aid, CAFOD, Christian Aid, Commitment for Life, Methodist Relief and Development Fund, Oxfam, Tearfund, War on Want, and the World Development Movement. The Baptist Union, Church of England and United Reformed Church are also members. Christian Aid and the Church of England produced jointly “Trade Justice: A Christian Response to Global Poverty,” available for £4.99 or online from Christian Aid.

How to identify fairly traded goods

People often ask how they can tell whether goods have been fairly traded. There are so many claims made . . . how do we know what is genuine? There are three main ways of recognising a genuine Fair Trade relationship:

The Fairtrade Foundation and the FAIRTRADE Mark

The FAIRTRADE Mark guarantees a better deal for producers through specific standards for producers and traders. There are two sets of standards for Fairtrade certified producers: one for democratic small farmers' organisations and one for plantations and factories. With respect to the latter, for example, producers must:

  • pay workers decent wages,
  • guarantee the right to join trade unions
  • and provide good housing when relevant

On plantations and in factories, minimum health and safety as well as environmental standards must be complied with, and no child or forced labour can occur.

Fairtrade registered traders agree to:

  • pay a price to producers that covers the costs of sustainable production and living;
  • pay a 'premium' that producers can invest in development;
  • make partial advance payments when requested by producers;
  • sign contracts that allow for long-term planning and sustainable production practices.

(information taken from the Fairtrade Foundation website, www.fairtrade.org.uk and supplemented by the Fairtrade Foundation)

The FAIRTRADE Mark, which is administered in the UK by the Fairtrade Foundation, is a guarantee that these standards have been met. If you see it on a product - and as of Winter 2007, there were more than 2,500 retail and catering products carrying the Mark! --you can be sure that the producers of that product (or, where only some ingredients are certified, the producers of those ingredients) have received a fair deal. If you want to see the Fairtrade standards for any particular product, you can find them by going to the Fairtrade Labelling Organization [FLO]'s website's standards page www.fairtrade.net/sites.standards/set/html.

NB: The FAIRTRADE Mark applies to products, not companies. It guarantees that a specific product's producers received a fair deal -- but should not be taken to imply anything about a company as a whole. If the company as a whole is not a Fair Trade Organisation (as certified below), there is no guarantee that the producers of its non-FAIRTRADE-Marked products are in a Fair Trade relationship

The Fair Trade Organisation Mark

The FAIRTRADE Mark's standards, however, apply primarily to commodity products: things like coffee, tea, bananas, cocoa, sugar and cotton. Most handicrafts aren't certified on a product by product basis - it would be too complicated to work out the standards for each product. So how do you know whether such products really are fairly traded? One way is to buy products produced or imported by Fair Trade Organisations. Fair Trade groups that produce and/or import fairly traded products -- whether these be food, handicrafts, clothing or any other product -- are recognised as Fair Trade Organisations if they adhere to the International Fair Trade Association [IFAT]'s Fair Trade standards and are members of IFAT.3

IFAT (www.ifat.org) is a global network of over 270 Fair Trade Organisations that works to develop Fair Trade markets, build trust in Fair Trade through monitoring and advocate for fairer trade. Members have been through IFAT's monitoring process. Traidcraft, Tearcraft, and Divine Chocolate are some of the best known IFAT members - others include clothing companies like Bishopston Trading and People Tree and handicrafts companies like Shared Earth.

In their promotional materials, Fair Trade Organisations will often indicate that they are members of IFAT, and often use the Fair Trade Organisation Mark. (seen left, on the IFAT banner) Membership of IFAT and use of the FTO Mark are also signs of a genuine Fair Trade relationship.

 

The British Association of Fair Trade Shops [BAFTS]

Importers and retailers can also be members of BAFTS - the British Association of Fair Trade shops (www.bafts.org.uk). BAFTS members also include, as the name implies, Fair Trade shops . . . though smaller local shops - while selling largely or wholly Fair Trade goods -- may not necessarily have applied for certification. To find a list of Fair Trade shops in our area, click on the "Where Can I Buy Fair Trade" link below.